Mediator in Microsoft/DOJ Case Throws in the Towel

SAN MATEO (04/03/2000) - Settlement talks between Microsoft Corp. and the U.S.

Department of Justice appeared dead Saturday after the court-appointed mediator between the two sides announced he was quitting.

U.S. District Judge Thomas Penfield Jackson tapped Richard Posner, chief judge of the U.S. Appeals Court in Chicago, last November to oversee talks between the government and the software giant. Last week, Jackson postponed his ruling in the landmark antitrust case in order to give Microsoft and the DOJ more time to negotiate.

Posner said talks finally broke down Friday night, and said a settlement appeared unlikely "at this stage of the litigation."

"I have endeavored to find common ground that might enable the parties to settle their differences without further litigation," Posner said in a statement. "Unfortunately, the quest has proved fruitless. After more than four months, it is apparent that the disagreements among the parties concerning the likely course, outcome, and consequences of continued litigation, as well as the implications and ramifications of alternative terms of settlement, are too deep-seated to be bridged."

Microsoft Chairman Bill Gates, in a conference call with reporters, blamed the government for the failure of the negotiations. He said Microsoft executives worked on a settlement in "good faith" for four months, and "certainly went the extra mile."

"There were divisions and extreme views on the other side that brought us to the point where mediation was not going to be successful," Gates said. "It is unfortunate, because (a settlement) would have been in the best interests of consumers, the government and Microsoft."

Now, Jackson likely will issue his ruling this week on whether Microsoft engaged in illegal antitrust behavior. On Nov. 5, Jackson came down hard on the Redmond, Wash.-based company, calling it a "monopoly" that had used the dominance of the Windows platform to crush competition in the Internet browser market.

Gates and William Neukom, Microsoft's chief legal counsel, said Saturday that they continued to believe Microsoft had successfully defended itself against the suit, which was filed in May 1998 by U.S. Attorney General Janet Reno and 19 state attorneys general.

"We've got a strong legal case," Gates insisted.

In Washington, the head of the DOJ's antitrust division, Assistant Attorney General Joel Klein, said he would seek remedies that prevent Microsoft "from using its monopoly in the future to stifle competition."

"We would have preferred an effective settlement to continued litigation," Klein said, "but settlement for settlement's sake would be pointless.'' Posner said both the DOJ and Microsoft had worked earnestly over the past four months to craft a settlement, saying "almost 20 successive drafts of a possible consent decree evolved over the past months." He also condemned press leaks about the negotiations, saying most of them were incorrect.

"I particularly want to emphasize that the collapse of the mediation is not due to any lack of skill, flexibility, energy, determination, or professionalism on the part of the Department of Justice and Microsoft Corporation," Posner said.

The full statement from Posner of his decision to cease mediating a settlement is as follows:

I regret to announce the end of my efforts to mediate the Microsoft antitrust case. Since my acceptance of this assignment on November 19 of last year, I have endeavored to find common ground that might enable the parties to settle their differences without further litigation. Unfortunately, the quest has proved fruitless. After more than four months, it is apparent that the disagreements among the parties concerning the likely course, outcome, and consequences of continued litigation, as well as the implications and ramifications of alternative terms of settlement, are too deep-seated to be bridged. This result is disappointing not only because of the amount of time that so many busy professionals, officials, and executives have devoted to the mediation, but also because the public interest would be served by avoiding further litigation, with its potential for unsettling a key industry in the global economy. I believed when I undertook this assignment that it was in the national interest that the case be settled, and I believe it even more strongly today.

Mediation is a confidential process, and I do not intend to make any public or private comments on the merits of the litiga tion, the negotiating positions of the parties, the individuals involved in the negotiations, or the content of any of the communications between the parties' mediation teams and myself. I can, however, without impropriety, say this much: Despite my strenuous efforts to maintain the confidentiality of the mediation, there has been a good deal of leaking and spinning, and this leaking and spinning have given rise to news reports that have created a misleading impression of several aspects of the process and that should be heavily discounted by anyone interested in hewing to the truth. One reason for my issuing this public statement is to correct the impression created by some news reports that there were no serious negotiations over possible terms of settlement until two weeks ago. On the contrary, almost twenty successive drafts of a possible consent decree, evolved over the past months, had been considered by the parties before it became clear late last night that the case would not settle, at least at this stage of the litigation.

I particularly want to emphasize that the collapse of the mediation is not due to any lack of skill, flexibility, energy, determination, or professionalism on the part of the Department of Justice and Microsoft Corporation.

I do not intend to make any further statements about the mediation.

I would like, in closing, to commend Judge Thomas Penfield Jackson for his efforts to bring about a settlement, and to thank him for according me the honor of asking me to mediate this complex, fascinating, and immensely important case.

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